Last updated ·Published ·By the WiserWork team
QBI Deduction Calculator: SSTB Phaseout
The 20% Qualified Business Income deduction — your amount, with the income limits applied
Short answer: The section 199A deduction is up to 20% of qualified business income, further limited to 20% of taxable income minus net capital gain. Below the 2026 threshold — $201,750 of taxable income, $403,500 joint — it makes no difference whether you run a specified service trade or business. Above it an SSTB’s deduction phases out over the next $75,000 ($150,000 joint), hitting zero at $276,750 and $553,500.
Worked example: Using this page’s defaults — $80,000 of qualified business income, $95,000 of taxable income, single, no capital gains — 20% of QBI is $16,000, while the taxable-income limit is 20% × $95,000 = $19,000. The deduction is the lesser of the two: $16,000. Taxable income of $95,000 is far below $201,750, so the SSTB question never arises.
Source: Rev. Proc. 2025-32 §3.26, Internal Revenue Bulletin 2025-45. It sets the 2026 threshold at $201,750 ($403,500 joint) with the phase-in range ending at $276,750 ($553,500) — a range the OBBBA widened from $50,000/$100,000.
| Test | Amount |
|---|
The QBI deduction (Section 199A) is the biggest tax gift self-employed people routinely underuse: 20% of qualified business income deducted straight off taxable income — no receipts, no spending required, just for operating a pass-through business (sole proprietorship, LLC, S-corp, partnership). A freelancer with $80,000 of profit deducts $16,000 and saves roughly $3,500. This calculator computes yours with the two rules that complicate it: the income thresholds (with the SSTB trap) and the lesser-of limit almost everyone forgets.
How the Deduction Is Computed
That second limb — the taxable-income limit — is the one that bites: a freelancer with big deductions elsewhere (huge 401(k) contributions, itemized deductions) can have taxable income below their business profit, which caps the QBI deduction at the smaller base. The calculator's table shows both limbs and which one binds you.
The 2026 Thresholds and the SSTB Question
| Taxable income | Regular business | SSTB (specified service) |
|---|---|---|
| Below $201,750 / $403,500 (MFJ) | Full 20% | Full 20% |
| In the phase range (+$75k/$150k, i.e. to $276,750 / $553,500) | W-2/property tests phase in | Deduction phases OUT |
| Above the range | Limited to 50% of W-2 wages (or 25% + 2.5% of property) | $0 |
SSTBs — health, law, accounting, consulting, financial services, athletics, performing arts, "reputation/skill" businesses — lose the deduction entirely above the threshold. Below it, SSTB status is irrelevant; the classification only matters for high earners, where it matters enormously (and drives real planning: income smoothing, retirement contributions to duck under the line, entity restructuring).
New for 2026: the 2025 tax act added §199A(i), a minimum deduction of $400 for taxpayers with at least $1,000 of qualified business income; both amounts are inflation-adjusted after 2026 (Rev. Proc. 2025-32 §2.12). The same act also widened the phase-in range above the threshold from $50,000/$100,000 to $75,000/$150,000 — so an SSTB owner now loses the deduction more gradually than under 2025 rules. The calculator below applies the widened range; it does not apply the $400 floor, so treat a computed result under $400 as a prompt to check §199A(i).
Planning Moves the Thresholds Create
- Near the threshold? Traditional 401(k)/SEP contributions reduce taxable income — a high-earning SSTB consultant contributing $60k to a solo 401(k) can resurrect a five-figure QBI deduction, making the contribution's effective value spectacular.
- Below the threshold with big deductions? The opposite logic: Roth contributions keep taxable income (and thus the QBI limit) higher — one of the rare cases where Roth wins on current-year math.
- S-corp owners: your "reasonable salary" is NOT QBI (only the pass-through profit is) — a higher salary shrinks QBI but may satisfy the W-2 test above the threshold. The interplay deserves a CPA at high incomes.
- The deduction stacks with everything: standard deduction, half of SE tax, retirement contributions — QBI comes off after AGI, before the brackets.
What Counts as QBI (and What Doesn't)
In: net profit from Schedule C businesses, rental real estate rising to a "trade or business" (most active landlords qualify, especially under the 250-hour safe harbor), K-1 pass-through income. Out: W-2 wages (including your own S-corp salary), capital gains, interest/dividends, and guaranteed partnership payments.
How to Use the Calculator
- Enter business profit (Schedule C net or K-1 QBI), total taxable income before QBI, and status.
- Mark SSTB if your field is on the list — it only changes the answer above the thresholds.
- Read the deduction, the binding limb, and the note's planning cue if you're capped or near a threshold.
Frequently Asked Questions
Do I need an LLC or S-corp to get the QBI deduction?
No — a plain sole proprietorship filing Schedule C qualifies fully. Entity choice affects other things (liability, SE tax via S-corp salary splits); QBI treats all pass-throughs alike below the thresholds.
What exactly is an SSTB?
Specified Service Trades or Businesses: health, law, accounting, actuarial, performing arts, consulting, athletics, financial/brokerage services, and any business trading on the owner's reputation or skill. Engineering and architecture are explicitly excluded (they qualify as regular businesses).
Does rental income qualify?
If the rental activity rises to a trade or business — regular, continuous involvement — yes, and the IRS's 250-hour safe harbor makes qualification concrete for active landlords. Triple-net leases and casual single-property landlords are shakier.
Why is my deduction less than 20% of my profit?
The taxable-income limit: the deduction can't exceed 20% of (taxable income minus capital gains). Big deductions elsewhere shrink the cap — the calculator's table shows exactly which limb binds.
Does QBI reduce self-employment tax?
No — it's an income-tax deduction only. SE tax still applies to full net profit (see the SE Tax Calculator). Together, though, QBI knocks the effective federal rate on freelance profit down substantially.
Is the QBI deduction permanent?
It was made permanent by 2025 legislation (it had been scheduled to expire). Thresholds index annually; this tool uses the 2026 figures from Rev. Proc. 2025-32.
Is my information private?
Yes — every figure computes locally in your browser.
QBI is a fifth of your profit deducted for free — the only requirements are knowing it exists and steering around the thresholds. Compute it here, then let the retirement-contribution interplay in the note guide the bigger planning conversation.